Retail sales outside of autos showed surprising strength last month, but economists worry that the rebound in all-important consumer spending will be short-lived as American families contend with rising unemployment and tight credit.
Removing autos, sales rose a better-than-expected 0.5 percent, led by gains at furniture stores, general-merchandise stores and specialty-clothing stores.
Many economists saw that as a sign that Americans are starting to spend again, a critical development for any recovery since consumer spending accounts for 70 percent of total economic activity.
"American consumers look like they are making their way back. They are cautious but they are no longer panicked," said Mark Zandi, the chief economist at Moody's Economy.com. "They are not spending with abandon, but they are spending enough to ensure that the nation's recovery will continue."
Retail sales actually fell 1.5 percent last month, the Commerce Department said yesterday, a plunge that reflected the end of the government's popular "Cash for Clunkers" program. Still, that drop was less than the 2.1 percent fall that economists expected.
Sales at gasoline stations jumped 1.1 percent last month. Even with recent increases, gas prices are still well below the peaks of 2008. Compared with September 2008, consumers spent an estimated $3.25 billion less per week to gas up their cars, giving them money they can spend elsewhere.
Those margins have begun to narrow because at this time last year, retail gasoline prices were in free-fall. Prices right now have stabilized around $2.50 a gallon. Still, Americans now are spending $1.8 billion less a week on gasoline.
But economists cautioned that consumer spending is unlikely to jump in coming months as households contend with rising unemployment, which now stands at a 26-year high of 9.8 percent, as well as tighter standards on bank loans and credit cards. The national jobless rate is not expected to peak until reaching 10.3 percent or higher next summer.
"With household finances likely to remain constrained by falling employment, declining real incomes and tight credit, we doubt that consumption will continue to grow at such rates," said Paul Dales, an economist at Capital Economics.
The overall economy, which slumped into a recession in December 2007, likely emerged from the downturn during the summer, helped by government stimulus efforts including the clunkers program.
The economy, as measured by the gross domestic product, likely increased at an annual rate of around 3 percent in the July-September quarter. Many analysts expect similar growth in the current quarter before it tapers off to half that level in the first half of next year.
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